Western Lithium USA Corp. is to merge with fellow
TSX-V-listed explorer Lithium Americas Corp., formally
combining the companies’ assets in the US and
Under the terms of the deal, Western Lithium will
acquire all the outstanding shares in Lithium Americas in a
transaction that values the company at Canadian dollar (C$) 80m
($64m*), but Lithium Americas’ CEO, John
Kanellistas, told IM that the move was a
"merger of equals", rather than a buy-out.
"The spirit of the agreement is one of
strategically combining our two companies," he said.
"We’ve been talking about this deal since 2012 and
decided that the time was right to do it now."
The combined entity will control two lithium
projects – Western’s Kings Valley deposit
in Nevada, US and Lithium Americas’
Cauchari-Olaroz property in Juyjuy, Argentina.
Kanellistas said that the timing of the merger
was "perfect", given the two projects’ respective
stages of development.
"Cauchari is ready to be developed today," he
told IM. "We can start generating revenues in
Argentina within two years, whereas Kings Valley is still four
years away from going into production."
He said that the strategy will be to use cash generated from
the operation of Cauchari-Olaroz to help fund the development
of Kings Valley.
|Western Lithium's Kings Valley project
is located in Nevada, US. (Source: Western
An NI 43-101 feasibility study on Cauchari-Olaroz
reported that the project holds around 2.7m tonnes lithium
carbonate equivalent (LCE) at a cut-off grade of 354 parts per
million (ppm) Li. Based on this, Lithium Americas contemplates
an initial commercial production rate of 20,000 tpa LCE.
Western Lithium’s prefeasibility
study for Kings Valley established a proven and probable
reserve of 570,000 tonnes LCE at a 0.32% Li cut-off. First
stage production at this site is projected at 13,000 tpa LCE,
ramping up to 26,000 tpa LCE by the fourth year of
Cauchari-Olaroz is a brine project and Lithium
Americas recently signed a heads of agreement with POSCO to use
the Korean steel company’s proprietary chemical
process to extract lithium at the site.
Western’s King’s Valley
project is a hectorite clay deposit and the company has been
working with Tenova Bateman Technologies to recover lithium
using its LiSX advanced solvent extraction technology.
Kanellistas said that both companies are
committed to using lithium production methods that do not rely
on solar evaporation ponds, the reliability of which can be
adversely affected by weather conditions.
An analyst commenting on the deal told
IM that the merger presented a number of
for both sides. "[The deal with Lithium Americas provides
Western with] medium-term cash flow from the permitted Cauchari
property, with a greater ability to finance it over the next 12
months," the analyst, who preferred not to be named, said.
They added that the new company will have the
benefit of a better balance sheet and deeper cash reserves as
it progresses its negotiations with POSCO, plus geographical
and product diversification.
In a joint statement, the companies indicated
that they would be targeting the lithium battery industry,
which is "seeking near-term production supply and a long-term
stable supply chain that assures volume, quality and
*Conversion made June 2015